There is an often-acknowledged quirk about us Indians. We are for the most part, value-conscious.
We rarely buy something by overpaying for it. Be it the vegetable mandi to e-commerce, we do not like parting with our money easily. Historically, that’s made us good savers.
Let’s now look at how this is relevant in the context of equity markets these days.
Markets at lows
The indices, Sensex and the Nifty, are currently trading at nearly 28% below their peaks seen in January and February, all thanks to COVID 19.
With the scenario worsening, there is one question on top of every mutual fund investor’s mind – Is it a good time to invest?
The right answer? It depends. If your asset allocation is good, you have a good emergency fund capable of seeing you through at least six months of no income in a worst-case scenario, and preferably, you don’t see an impact on your job or sources of earning then the question can be asked in earnest.
For fund managers, it’s akin to a one-time sale
Almost every company listed on the Nifty or the Sensex is trading at values that are well below peaks or even close to year-end lows. This includes companies that only had optimism to thank for the increase in their share prices.
But there are also companies that are shining examples of Indian Industry and have helped India earn its laurels as an economic powerhouse. For example, TCS and Infosys which employ tens of thousands of Indians and have put India on the global map are trading at close to their year-end lows.
If you are a believer in India’s growth story, despite this pandemic, then this is a time to continue investing if you have the income to support investments. Those of you who stay invested now will reap the benefits in the future.
These companies have survived multiple crises are much better placed to survive another crisis.
When such companies, where there is no fundamental reason for their share prices to have crashed apart from this pandemic, are trading at such lows, it provides an excellent opportunity for your fund manager. This is more so if their analysis tells them the impact of this pandemic is likely to be short term (up to 2 years) rather than negative in the long run.
Just like you, most of them are value-conscious too. They would want to buy shares of good companies at lower rather than higher levels, given a choice.
For them, this opportunity to acquire fundamentally sound and great companies due to a significant, but in the long run temporary, event is a rarity.
If you are a believer in India’s growth story, despite this pandemic, then this is a time to continue investing if you have the income to support investments. Those of you who stay invested now will reap the benefits in the future. Therein, though, lies the caveat.
Equity is for things you need a decade later
We don’t encourage opportunistic buying during a market fall, with the hope of making a quick buck. That’s a dangerous game to play. However, for those willing to think and stick to long term plans (10 years or more), now is a rare opportunity to give your investments a boost they get only once in a decade.